Guaranty Bancshares(US:GNTY)2024-05-06 20:36PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for Guaranty Bancshares, Inc. as of March 31, 2024, and for the three months then ended Consolidated Balance Sheets As of March 31, 2024, total assets decreased to $3.13 billion, primarily due to a reduction in net loans, while total equity slightly increased to $305.9 million Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | Total Assets | $3,127,438 | $3,184,791 | | Cash and cash equivalents | $73,093 | $89,524 | | Loans, net | $2,234,012 | $2,290,881 | | Securities (AFS & HTM) | $592,750 | $600,403 | | Total Liabilities | $2,821,528 | $2,880,945 | | Total deposits | $2,627,844 | $2,633,246 | | Federal Home Loan Bank advances | $75,000 | $140,000 | | Total Equity | $305,910 | $303,846 | Consolidated Statements of Earnings Net earnings for Q1 2024 decreased to $6.7 million from $8.3 million in Q1 2023, primarily due to a significant increase in interest expense Consolidated Earnings Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net interest income | $23,587 | $25,162 | | Reversal of provision for credit losses | $(250) | $— | | Noninterest income | $5,258 | $4,905 | | Noninterest expense | $20,692 | $19,967 | | Net earnings | $6,681 | $8,277 | | Diluted earnings per share | $0.58 | $0.69 | Consolidated Statements of Cash Flows Net cash provided by operating activities sharply decreased to $1.1 million in Q1 2024, resulting in a net decrease in cash and cash equivalents of $16.4 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,120 | $11,712 | | Net cash provided by investing activities | $46,385 | $44,761 | | Net cash used in financing activities | $(63,936) | $(4,815) | | Net change in cash and cash equivalents | $(16,431) | $51,658 | Notes to Consolidated Financial Statements The notes detail the securities and loan portfolios, allowance for credit losses, and regulatory capital, confirming the company exceeds all 'well capitalized' requirements - The company's loan portfolio decreased from $2.32 billion at year-end 2023 to $2.27 billion as of March 31, 2024. The allowance for credit losses (ACL) was $30.6 million, representing 1.35% of total loans3739 - As of March 31, 2024, the company and its bank subsidiary met all capital adequacy requirements to be categorized as 'well capitalized' under regulatory frameworks98100 - Nonaccrual loans increased to $6.2 million as of March 31, 2024, up from $5.6 million at the end of 202357 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 performance, highlighting an improving net interest margin, stable asset quality despite a foreclosure, and strong liquidity and capital positions Quarterly Highlights Management emphasized an improving net interest margin of 3.16%, strong asset quality despite a $14.9 million commercial real estate foreclosure, and healthy liquidity and capital levels - Net interest margin (NIM) on a fully taxable equivalent basis improved sequentially from 3.02% in Q3 2023 and 3.11% in Q4 2023 to 3.16% in Q1 2024134 - Asset quality remains strong, though nonperforming assets as a percentage of total assets increased to 0.68% at March 31, 2024, from 0.18% at December 31, 2023, due to a single foreclosure. Net charge-offs were low at 0.02% (annualized)136 - The company maintains a healthy liquidity position with total available contingent liquidity of $1.3 billion and a strong capital level, with a total equity to average assets ratio of 9.6%136 Results of Operations Net earnings for Q1 2024 decreased to $6.7 million due to a $1.6 million decline in net interest income, driven by higher interest expenses Key Earnings Data (in thousands) | Metric | Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Net earnings attributable to Guaranty | $6,688 | $8,281 | | Net interest income | $23,587 | $25,162 | | Net interest margin | 3.18% | 3.25% | | Return on average assets | 0.85% | 1.01% | | Return on average equity | 8.93% | 11.18% | - The decrease in net interest income was primarily caused by a $5.2 million (43.3%) increase in interest expense, which was only partially offset by a $3.6 million (9.7%) increase in interest income compared to Q1 2023140 - A $250,000 reversal to the provision for credit losses was recorded in Q1 2024 due to a $57.3 million decrease in loan balances and stable credit quality trends150 Financial Condition Total assets decreased by 1.8% to $3.13 billion, mainly due to a 2.5% decrease in gross loans, while nonperforming assets rose to 0.94% of total loans Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2024 | December 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Commercial and industrial | $269,560 | $287,565 | (6.26%) | | Construction and development | $273,300 | $296,639 | (7.87%) | | Commercial real estate | $906,684 | $923,195 | (1.79%) | | 1-4 family residential | $523,573 | $514,603 | 1.74% | | Total loans held for investment | $2,265,257 | $2,322,576 | (2.47%) | Nonperforming Assets (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Nonaccrual loans | $6,161 | $5,592 | | Other real estate owned | $14,900 | $— | | Total nonperforming assets | $21,297 | $5,826 | | Ratio of nonperforming assets to total assets | 0.68% | 0.18% | - Total deposits remained stable, decreasing by only $5.4 million (0.2%) to $2.63 billion during the quarter. Noninterest-bearing deposits decreased by $24.1 million, while interest-bearing deposits increased by $18.7 million209210 Liquidity and Capital Resources The company maintains a strong liquidity position with over $1.5 billion in contingent funding and all regulatory capital ratios significantly exceeding 'well capitalized' thresholds Contingent Liquidity Sources (in thousands) as of March 31, 2024 | Source | Line of Credit | Borrowings | Total Available | | :--- | :--- | :--- | :--- | | FHLB advances | $1,106,209 | $75,000 | $1,031,209 | | Federal Reserve discount window | $231,583 | $— | $231,583 | | Federal funds lines of credit | $55,000 | $— | $55,000 | | Correspondent bank line of credit | $25,000 | $— | $25,000 | | Total Liquidity Lines (excluding BTFP) | $1,417,792 | $75,000 | $1,342,792 | Regulatory Capital Ratios as of March 31, 2024 | Ratio (Consolidated) | Amount | Ratio (%) | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | $371,036 | 15.58% | | Tier 1 capital (to risk-weighted assets) | $306,647 | 12.87% | | Common equity tier 1 capital (to risk-weighted assets) | $299,430 | 12.57% | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility, with simulations indicating a liability-sensitive position where a 100 basis point rate increase would decrease net interest income by 1.37% Interest Rate Sensitivity Analysis (Simulated Change over 12 Months) | Change in Interest Rates (Basis Points) | % Change in Net Interest Income | % Change in Fair Value of Equity | | :--- | :--- | :--- | | +300 | (3.05%) | (14.34%) | | +200 | (2.12%) | (8.47%) | | +100 | (1.37%) | (3.91%) | | -100 | 0.02% | 2.53% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of the reporting period, with no material changes to internal control over financial reporting during Q1 2024 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report266 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls267 PART II — OTHER INFORMATION Item 1. Legal Proceedings Management believes that the outcome of current legal proceedings is unlikely to have a material adverse effect on the company's financial condition or results of operations - In the opinion of management, it is remote that the impact of current legal proceedings would have a material adverse effect on the Company's financial condition, results of operations, or cash flows269 Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes have occurred in the Company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023270 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2024, the company repurchased 11,651 shares at an average price of $28.76, and a new repurchase program for up to 1,250,000 shares was approved effective April 21, 2024 Share Repurchases in Q1 2024 | Period | Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January, 2024 | — | $— | | February, 2024 | 9,251 | $28.73 | | March, 2024 | 2,400 | $28.88 | | Total | 11,651 | $28.76 | - A new stock repurchase program was approved on March 13, 2024, authorizing the repurchase of up to 1,250,000 shares, effective from April 21, 2024, to April 21, 2026271 Other Items (Items 3, 4, 5, 6) This section confirms no defaults on senior securities, non-applicability of mine safety disclosures, no Rule 10b5-1 trading arrangement changes by directors or officers, and provides a list of exhibits - Item 3: No defaults upon senior securities were reported274 - Item 5: No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter276